If you want to give your credit score a boost, then you must understand that it won’t happen overnight. Credit score improvement is a long process. You have to be patient and just work for it. However, if you are careful enough and take the right steps, then eventually you can easily attain a promising score.
The following are 6 of the best ways to improve CIBIL score:
- Watching Credit Card Usage
Credit cards can help build a good credit score. However, they can also ruin it. It all depends on how you use them.
Credit utilization is one of the biggest factors that affect your CIBIL score. Using credit cards excessively leads to a high credit utilization which is harmful to your score. However, there are two ways you can tackle this problem:
- You can limit your credit card utilization by using cash or other payment methods save for credit cards.
- You can divide your expenses on multiple credit cards. So, if you have to buy an air conditioner worth Rs. 30,000 and you have two credit cards, then you can charge Rs. 15,000 on each.
- Paying Bills on Time
Plain-vanilla timely payments can do wonders for your credit score. Not only you can minimize your debt this way, you can also make a strong case for yourself for potential lenders. Banks and financial institutions simply love those borrowers who have a long history of timely payments because it’s easy to trust them with their money.
- Fixing Credit Report Discrepancies
How often do you check your credit report every year? If your answer to this is “once” or “never”, then maybe that’s the reason why you are unable to improve score.
There are several benefits of monitoring your CIBIL report, one of which is the identification of mistakes or errors.
It’s easy to think that a mistake or two in your CIBIL report can’t do much harm. However, it’s completely false. Mistakes in credit reports can have grave consequences that include compelling you to get a loan for low CIBIL score.
Taking an example, if your name or address is printed wrong or if there are false mentions of late payments in your CIBIL report, then your score could easily fall by hundred points or so.
Checking your CIBIL report frequently can help you find and rectify mistakes that are hurting your score. Plus, if you identify anomalies or unrecognized transactions, loan inquiries, etc. then you can also prevent a potential case of identity fraud.
- Adding Something New to The Mix
A singular credit history can put limitations on your score. So, if credit report contains details of only credit card usage, or a personal loan account, etc. then you can increase credit score only so much.
Even if you are doing all the right things for your score, you can’t surpass a certain limit unless you diversify your credit usage. This is because the more diverse your credit history is, the better it’s for your score. So, if your score is solely based on your credit card usage, then you can make an improvement by availing a small personal loan, auto loan, etc.
- Saying “No” to Minimum Payments
Minimum credit card payments and credit score improvement don’t go hand in hand. You can only choose either of the two.
Banks highlight these “minimum payments” to lure more customers into applying for their credit cards. However, minimum payments lead to debt accumulation and lower CIBIL score. So, if you really want to enhance your score then you should always pay your credit card bills in full.
- Debt Consolidation
Debt consolidation is not a direct but rather an indirect way to improve credit score. In this, you combine all your loans into one. So, instead of paying several EMIs every month, you need to pay just one. The result is better money management and timely payments.
Many finance experts claim that debt consolidation can help improve CIBIL score really fast, especially if pay the EMIs on time.
If you don’t want a future in which you have to look for a loan for low CIBIL score, then it’s best you start caring for your credit report as soon as possible. In fact, today is as good as any.